Mr. Seamus Coffey:

I agree that is where the focus should be. At times, we get caught up in looking at the impact of various minor issues, but, as the Deputy said, towards the top of the table, once one starts with gross profits and examines the tax adjustments made, the sums involved are huge, particularly for capital allowances. The provisional figures Revenue has for 2016 show another jump relative to the figures for 2015. The figure of €46 billion for 2015 could be close to €60 billion for 2016 when the final figure is published. It has indicated that it might move in that direction and the issue should be explored.

Are we unique in what we offer in Ireland? Why do the claims and sums seem to be so large relative to the size of the economy? When it comes to intangible assets, our regime is similar to that in place in other countries. As part of the review, I examined the regimes elsewhere and at a top line level, they are similar. The common consolidated corporate tax base proposal covers intangible assets and seems to mirror the provisions set out in the tax code. There must be something different in the Irish regime that is attracting companies here on such a scale. Other countries do not see the bringing onshore of intangible assets that Ireland is seeing, including assets worth hundreds of billions of euro and transactions that exceed GDP. That does not happen in other countries. We must try to understand why this is happening. There could be benign reasons. The OECD process is all about aligning profit with substance and it may be that companies have the substance here and are moving their intangible assets here in order that the profits linked with the assets are also linked with the substance or the Irish regime could have an unusually attractive feature that is not obvious to me following a top line analysis.

The Deputy mentioned trade charges. We should consider changes to trade charges and royalty payments and, in particular, update our transfer pricing rules. In many cases, royalty payments are going to Caribbean islands where the companies do not have substance. In the next few years we should update our transfer pricing rules and eliminate the ability to use them as a deduction for Irish tax purposes if the payments are made to warm sandy beaches. That should be done by the end of 2020.

The Deputy also referred to capital allowances and made a point about the prices being set. While legislation requires a market price to be used, we should consider extending transfer pricing legislation to capital transactions. Currently, transfer pricing only applies to trading transactions where one is buying goods or a service from somebody. Equally, it should apply when an asset is being bought. While implicitly there is a requirement to use the market price, it should be explicitly applied in legislation to all capital transactions. That would perhaps offer us the opportunity to examine these large amounts and ascertain whether they are appropriate or companies are exploiting existing legislation. That is where the focus should be. We cannot be definitive regarding the level of exploitation, but the size of the figures indicates that they are worthy of examination.